The Opportunity for Ag Robotics Startups

On September 12, 2016, Governor Jerry Brown signed a historic bill into law that requires agriculture businesses and farm operators to pay overtime to farmworkers for any time worked after eight hours in a day or 40 hours in a week. Sponsored by United Farm Workers of America, the bill was seen as a major win for the roughly 1.2 million full-time farmworkers in the United States. Nearly one-third of these farmworkers are employed in California.

The bill stands to particularly impact horticulture producers in California where over 60 percent of domestically-grown fruits and nuts and roughly 33 percent of US vegetables are grown. Before the bill was passed, the law required farm businesses to pay workers for any time worked in excess of 10 hours a day or 60 hours in a week. The remainder of California’s farmworker labor laws represent a scattered and often non-cohesive assembly of exemptions, exceptions, and other nuances.

The new bill received hefty opposition from agricultural lobbying groups, which warned that the new requirement would put a massive financial strain on many farmers and cause an already strained industry to endure added pressures. They also pointed out that many farmers and businesses may simply reduce the number of hours they provide to employees, downsize their payroll, or pass on the extra costs to consumers. It may also make it harder for some producers to compete with the lower cost of foreign imports.

It also exacerbates an already difficult labor situation in California and beyond.Some reports indicate that farm labor shortages have affected as many as 20 states, largely as a result of a lengthy visa process for migrant workers. Although farmers have few other choices than to wait for the paperwork to be approved, crops are far less patient.

Ag robotics startups can enhance human labor

But, as with the old adage that one man’s trash is another man’s treasure, the developing farm labor dynamic in California and beyond spells good news for one group: agriculture robotics startups. The small but growing crop of ag robotics startups are betting on the need for farm operators to transfer some of the work performed by human workers to robots in the mid-to-near future.

Did you know that AgFunder is one of the most active agrifood tech investors?

“Labor costs are very difficult for farmers to control,” BreAnn Washburn, director of operations and marketing at Smart Vision Works, tells AgFunderNews. “Immigration policies have created labor shortages, essentially a supply and demand problem. Farmers had to pay employees more to keep them and to stay competitive, even before this new legislation.”

“If farmers were struggling to stay profitable before, increasing their costs will only encourage them to find alternative solutions to their labor needs. New technologies are one way that farmers can cope with labor shortages and increasing labor costs,” she adds. “In our experience, farmers are not looking for new technologies that will replace employees, but technologies that will help them be more efficient with the employees they already have.”

The Utah-based company uses proprietary machine learning algorithms to aid in sorting and grading produce in agricultural processing lines. Picture massive warehouses in California where thousands of oranges, lemons, and other fruits are examined, sorted, and processed. Typically, farmworkers perform the vital function of determining which apples are prime to place on store shelves and which ones should be chopped up and turned into apple juice.

For the date industry, Smart Vision Works has developed a platform that can sort by size, color, shape, texture, and even ripeness. The company claims its clients 47 percent in labor direct labor costs.

Finding labor to help harvest, transport, sort, grade, inspect, and package produce isn’t as simple as it sounds. Agribusinesses have to spend several hours training new employees on how to handle produce and all the technicalities involved in the work. A poorly-trained or unskilled employee could make mistakes that affect a huge portion of a business’ total crop, which quickly translates to lost profits.

“You have heads of broccoli that come in which have to be prepared correctly. So, there is on-the-job training that has to happen. The employee is very important to the quality system, and they have to pack these things correctly, even if we are talking about a mixed vegetable tray,” Carl Vause, CEO at Soft Robotics tells AgFunderNews. “Let’s automate the low-skill, dull, dirty, and dangerous jobs and use the labor supply we do have for meaningful positions and then pay overtime to those employees. If I will pay overtime, I would much rather pay it to the most important positions.”

Soft Robotics has developed a robot that can help with processing, and maybe one-day picking. The machine has a mechanical arm with grippers — “octopus fingers” — that can manage delicate products like fruits.

Agricultural business operators experience roughly 30 percent turnover in these positions, he says, which is unsurprising when it comes to what he refers to as the “dull, dirty, and dangerous” tasks that are necessary to getting produce from the fields to the store shelves. He recalls one major berry producer in the Central Valley who was forced to leave about 20 percent of its total crop unpicked in the field due to the labor shortage.

“The margins on food are traditionally very low. Anytime you have a substantial rise in labor costs, which is the biggest cost in their business, it puts obvious pressure on margins,” he explains. “At the same time, they are more concerned about the availability of labor and making sure they have enough employees.”

A small ecosystem

Despite these increasingly attractive fundamentals, there are very few machine labor-based and robotics startups in the agtech universe. Other examples alongside Soft Robotics and Smart Vision Works include Abundant Robotics, AGROBOT, RowBot, France-based Naio Technologies,Californian weeding robot attachment Blue River Technologies, and Spain’s PlantTape, which has developed an automated plant transplanting system.

There are a few other robotic laborers around including vineyard-pruning winebots, nursery assistant robots, and livestock herding bots. The majority of these solutions, however, are far from reaching widespread commercialization or affordability for the majority of producers.

More food and ag-related startups are using robotics for other applications. Zymergen taps robotics to produce microbial DNA, and 3D Robotics, which applies the technology in the context of drones. So does Florida-based Prioria Robotics, which offers precision ag-focused robotics solutions.

Smart Vision Works sees a few large-scale competitors in the machine -labor segment, but they don’t offer many products for small-scale agribusinesses’ budgets.

“Smaller niche agricultural markets have never been attractive for the larger machine labor companies because those farmers can’t really afford the tech,” says Washburn. “With new regulations, they can’t really afford not to. I think we will see larger robotics/machine labor companies increasing their focus on the smaller markets or developing broader use technology.”

Washburn thinks this bill will spur new demand for robotics-based labor solutions and promote more innovation.

She is not alone in this sentiment. According to the Wall Street Journal, autonomous robots may be the “warehouse workers” of the future across a variety of industries.

“I think we will see machine-based labor solutions, but I also think we will see a lot of impact and response in cloud-based software solutions, pesticides, herbicides, and others,” says Washburn. There may also be a demand for products tailored to niche markets where the mainstream solutions created for citrus and other produce groups with similar qualities don’t always fit, she adds.

She also points out that the new bill will likely have an impact on the entire agricultural supply chain, where a splash at one end of the system will almost always creates some ripples down the chain.

Challenges for robotics startups

There are, of course, some challenges to innovating robotics solutions in agriculture. The first is cost and development time.

Regardless of whether this new bill promotes more innovation and a greater number of robotics startups, farm operators, and agribusinesses will still have to wait before a bevy of solutions hit the market.

Robotics R&D is usually expensive and time-consuming, which has put some investors off. During 2015, non-drone-related startups raised just over $45 million out of the $4.6 billion total funding collected by agtech startups, according to AgFunder data. It was a very small portion of the $389 million raised by drones & robotics companies collectively. And during the first half of 2016, AgFunder did not record any non-drone-related robotics funding transactions. Some investors are concerned that robotics companies are too capital intensive compared to software companies, and that hardware is easier to copy but more expensive to distribute.

Adaptability is another challenge.

“Robotics are not very adaptable right now. Agriculture is very unstructured by definition. No tomato is the same size, shape, and weight. Robotics became popular originally in very structured environments like automotive assembly and airspace,” says Vause.

Ensuring the robotics solutions comply with stringent food safety protocols is another element to consider with innovation, he adds.

Of course, many producers also have some hesitation when it comes to incorporating robotics into their operations. What if the machine breaks? Who will be able to fix this complicated piece of machinery?

Vause sees this as a massive opportunity for younger generations to fill in the tech-savvy blank for some farmers and agribusinesses. He has seen it happen in other industries, including the automotive industry in Detroit where one major car maker teamed up with a local college to create an associate degree in automation. According to Vause, that car maker went on to hire every single graduate from that degree program. Some of California’s ag-focused institutions like UC Davis or San Luis Obispo could take a similar approach to creating a “robotics in agriculture” degree program.

“If you think about skilled trades, whether it’s welding or any of those skills, tradespeople do very well. Robotics in agriculture is a skilled trade. There’s a huge opportunity to create that type of skill and apprenticeships around robotics,” says Vause.

While the challenges may keep the pace of innovation and number of options on the market for farmers at bay, there’s little doubt that robotics will form an increasing part of the farm in years to come. And some investors have identified robotics startups as a particular area of interest within agtech, especially those coming from other industries. Yamaha Motor Ventures, the corporate venturing arm of the Japanese automotive giant, is one example. Other investors that have placed bets in robotics include Pontifax AgTech, Syngenta Ventures, and Monsanto Growth Ventures, which all funded Blue River’s recent $17 million Series B. Meanwhile business development organization Ag Ventures Alliance funded Rowbot, and French VC firm CapAgro invested in Naio’s $3.37 million seed round alongside cleantech and mobility tech firm Emertec, and crowdfunding platform WiSeed.

What do you think? Why have robotics startups been so underfunded by the venture capital community? Email [email protected].

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